Herman Van Rompuy, president of the European Council, has advocated eurobonds
as a means of sharing the burden of the region’s debt in a call that is
likely to raise tensions with Berlin.

Ahead of next week’s European Union summit, Mr Van Rompuy unveiled a report which called for the examination of “the pooling of some short-term sovereign funding instruments, for example, treasury bills, on a limited and conditional basis”.

The report was commissioned by the European Council and is designed – once it is finished in December – to be a “time-bound road map to the achievement of a genuine economic and monetary union”.

Mr Van Rompuy – who said the EU was the “biggest peacemaking institution ever created in world history” as it was awarded the Nobel Peace Prize – also called for a banking union, with a single supervisory body and a common resolution framework. But, in a move that will be welcomed by the UK, Mr Van Rompuy also said the new regime should be “fully consistent with the single market” and work to “preserve the level playing field across the EU”.

The call came amid reports that Greece has “caved in” to demands by the troika to impose €9bn (£7.2bn) of austerity measures next year, rather than the €7.8bn set out in the country’s draft budget.

Despite that – and new figures showing the unemployment rate reaching a record 25.1pc – Germany hit out at calls from Christine Lagarde, head of the International Monetary Fund, for Greece and Spain to be given more time to reduce their deficits.